For Immediate Release
December 1, 2003
California – Expiration of Partial Exemption for Manufacturing Equipment Among Some of the Changes in State’s 2003 Legislative Session
In a state where sales and
use tax manufacturing exemptions are scarce, they will become, for all
practical purposes, non-existence on January 1, 2004.
The California tax code,
under §6377, provides for a partial exemption from state sales tax on the
sale of certain tangible personal property to qualified persons for use in
certain manufacturing operations. Effective January 1, 2004, this
partial exemption expires due to a provision in the law dealing with
certain employment statistics. If, at any time, the total
non-aerospace manufacturing sector falls below 100,000 jobs, the exemption
will end on January 1 of the year following that determination. It
has been determined by the CA Employment Development Department that this
was the case on January 1, 2003, thus resulting in the expiration of the
exemption effective January 1, 2004.
Consequently, retailers
and qualified purchasers may not accept or issue §6377 Manufacturer’s
Exemption Certificates for sales or purchases made after December 31,
2003.
Other highlights of the 2003 session include:
-
Changes to components of statewide 7.25% sales tax rate - Effective July 1, 2004, the state portion of the sales and use tax rate will increase 0.50%, with a decrease of 0.50% to local sales and use tax rates. The state will also establish a Fiscal Recovery Fund to help repay the deficit funding bond, using the 0.50% state increase.
-
Managed audit program - The State Board of Equalization is authorized to enter into managed audits with taxpayers, whereby the taxpayer performs an audit of its own books and records to determine tax deficiencies, with limited guidance from the Board.
-
Voluntary use tax reporting - Until January 1, 2006, the period by which the State Board of Equalization may issue an assessment for unreported use tax for certain qualified taxpayers is reduced from 8 to 3 years, provided it has been determined that failure to report and pay tax was due to reasonable cause. Qualified taxpayers are those that voluntarily file use tax returns to report tax on goods purchased outside of California for use in California.
If
you would like additional information on this topic or have any questions,
please contact James Privett, Regional Vice President - Sales & Use
Tax Group at (615) 373-8373. E-mail jprivett@thesaltgroup.com
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